IBM Pours $100 Million Into Ad Consulting

Big Blue is spending big to build up its marketing consulting business.

International Business Machines Corp. will announce on Thursday that it is investing $100 million into a recently formed division IBM Interactive Experience. The division pulls together IBM’s digital marketing agency and its other marketing-related businesses such as data analytics and design, all of which are aimed at helping companies target and market to customers more effectively.

IBM said it plans to hire 1,000 new staff for the marketing consulting group, which already has over 5,000 staffers around the world. IBM also plans to open laboratories –spaces specifically designed for clients to work side by side with IBM staffers –in 10 markets around the world, including Mexico City, Sao Paulo and Shanghai.

One big focus area for IBM is data analytics, which is increasingly important to marketers. The company said that it is moving IBM researchers and data scientists into the new division to help marketers make sense of the enormous amounts of data becoming available through new channels, including social media.

The group recently worked with a large consumer product goods company to help them figure out which two major movie stars they could use as brand ambassadors in their marketing campaign. IBM used its software to mine social media and other sources such the client’s customer data to determine which of the celebrities had the most influence with its customers.

Madison Avenue firms have been moving in the same direction. Omnicom Group’s data and measurement unit Annalect, for instance, has been trying to bolster its data analytics expertise. IBM’s investment pits it more directly against the ad companies. IBM has already raided several for talent, grabbing executives from shops such as Wunderman, Ogilvy & Mather and Digitas.

Mr. Fouts estimates that IBM’s digital agency alone brought in about $800 million in revenue last year and he estimates that it will be a $1 billion organization within five years. IBM declines to disclose revenue.

Still, IBM does face some challenges in its attempt to woo marketers. “IBM Interactive still suffers from brand awareness challenges,” said Gartner in a recent report.

Madison Avenue is getting used to the competition. Over the past few years, Accenture and Deloitte, which both compete with IBM in management consulting have also beefed up their marketing capabilities. At the same time tech companies such as Salesforce, Adobe and Oracle Corp. have also jumped into the fray with many of them building out technology platforms –with the help of expensive acquisitions–that can help companies manage their marketing efforts across different media and channels using technology.

“Technology companies are fighting for access to the marketing department, which was previously the domain of ad agencies, and marketers are welcoming it,” said Brian Wieser, an analyst at Pivotal Research.

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IBM is in the advertising business now? This smells much like the AOL's various adventures. Big on current buzz words, god-awful on execution. IBM seems to be mimicking Microsoft: miss major shifts in consumer habits, get in late, execute poorly.

6:49 pm March 28, 2014

John Kottcamp wrote:

I think IBM's decision is quite responsive to the direction of the market. CMOs are looking beyond agencies to nimble and innovative partners who can help them chart the digital waters. The only thing I must question is whether anyone uses nimble and innovative to describe IBM?

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